Cogo Group, Inc. (COGO)

Q4 2011 Earnings Call

March 15, 2012 4:30 PM ET


Will Davis – Chief Marketing Officer

Jeffrey Kang – Chairman and CEO

Frank Zheng – CFO


Quinn Bolton – Needham & Company

Mark Tobin – ROTH Capital Partners

Michael Walkley – Canaccord Genuity

John Formicola – Performance Capital

JD Abouchar – GRT Capital



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Ladies and gentlemen, thank you for standing by. Welcome to the Cogo Group Inc., 2011 Annual Earnings Results Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions)

At this time, I’d like to turn the conference over to Will Davis, Chief Marketing Officer of Cogo Group Inc. Please go ahead, sir.

Will Davis

Thank you very much, and good afternoon to everyone. My name is Will Davis, Cogo’s Chief Marketing Officer, and I’d like to thank you all for joining us today to participate in Cogo’s 2011 fourth quarter and annual earnings conference call.

After the market closed today, Cogo issued a press release reporting unaudited financial results for the year and quarter ended December 31, 2011. This release can be accessed in the Investor Relations section of Cogo’s website at and on most other financial websites. The discussion today will be hosted by Jeffrey Kang, Chairman and CEO, who will discuss the Company’s business operations, myself who will also comment on other aspects of the business, and Frank Zheng, our CFO, who will report on the Company’s financials.

Before we begin, I’d like to remind everyone that the call today may contain forward-looking statements regarding future events and the financial performance of the Company. We wish to caution you that such statements are at present just predictions and actual results may differ materially as a result of the risks and uncertainties inherent in the Company’s business. We refer you to documents that the Company files periodically with the SEC, specifically the most recently filed Forms 10-K and 6-K as well as the Safe Harbor statement made in today’s press release.

These documents contain important risk factors that could cause actual results to differ materially from those contained in the company’s current projections. Cogo assumes no obligation to revise the forward-looking information contained in today’s call.

At this time, I’d like to turn the call over to Jeffrey. Jeffrey, the floor is yours.

Jeffrey Kang

Thank you, Will, thanks to everyone for joining this call. Today, I will focus the rest of – majority of the call on my proposal asset purchased that we announced in the press release by today at 10 pm. You can find all the relevant financial data about our fourth quarter and annual performance in our press release that (inaudible) before 10 pm today.

Our press release after the market close, out remind my proposal to purchase for between $60 million to $82 million certain entities that accounted for approximately 30% of Cogo’s assets liabilities and revenue. Cogo’s audit committee comprising our independent board members will oversee the entire process and we expect to close the transaction towards the end of the second quarter of 2012.

The purchased entities will continue to be run in the same manner as before and the management will be promoted from within. I will continue to operate as Chairman and CEO of Cogo on a full time basis. The sole purpose of this transaction is to demonstrate to the financial markets that the intrinsic value of our both business operations and as a financial assets are significantly higher than the current market value. Then you revealed what drove me to make this proposal? Our stock closed at $1.83 on Wednesday, which equals to a total market cap for Cogo of around $60 million, while our tangible book value is well over three times this month. Additionally, Cogo has remained profitable every quarter and our tangible book value grows every quarter.

Many investors may disagree with parts of our businesses strategy, but the stats remains that we continue to generate eminence of the profit every quarter and we have been consistently buying back our own stock.

Not only is the market place now giving us credit for the income producing quantities of our business, it’s significantly discounting the value of our financial assets. Using simple math, our current assets, which are relatively an increase, minus our liabilities, equals over US$270 million, and our market cap is only $60 million.

Unfortunately, these obvious market discrepancies doesn’t appear to be a temporary issue. Simply put, my proposal to purchase 30% of the company for the amount equipped to the, or higher than the company’s total market cap is above the strategic move intended to demonstrate the complete performance and the legitimacy of Cogo’s reported financial numbers.

It’s my sincere hope that this proposal once approved and implemented will go along with to what shareholders achieve in the intrinsic value Cogo. This is stationed to then come live. My personal investment of such significant amount of cash in this transaction will hopefully demonstrate to everyone the true value of our company. Will?

Will Davis

Thank you, Jeffrey. Cogo ended the year with 96 blue-chip customers flat sequential and up 4% from the prior year period. The company grew it’s SME customer base sequentially by 138 reaching 1,771 at the end of 2011, up 8% from the prior quarter and up 17% from the year ago period. Cogo’s total customer base is now 1,867, up 17%.

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